DCIT-4 (1) (1) , Mumbai Versus Interactive Brokers (India) Pvt. Ltd.

2017 (1) TMI 734 - ITAT MUMBAI

Disallowance of mark to market (MTM) loss - Held that:- We find that the issue stands decided in favour of the assessee by the Tribunal in the matters relied upon by the AR. It is found that in the of the Kotak Mahindra Investment Ltd. (2013 (7) TMI 355 - ITAT MUMBAI ), the Tribunal has held that M T M losses have be allowed. We do not find any infirmity in the order of the FAA. So, respectfully, following the orders of the Tribunal, we decide issue against the AO.
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Disallowance under secti .....

eal in favour of the assessee.
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Disallowance of depreciation - AO held that assessee was not the owner of the assets, that it had not produced any documentary evidence to prove the payment was made by it, that it was not eligible for claiming depreciation - Held that:- We find that the group concern of the assessee had purchased computers/computer related accessories in Hong Kong, that the foreign-entity had made the initial payment, that the goods were shipped to India, that assets are app .....

mber Revenue by : Shri K. Mohandas - DR Assessee by : Shri Neeraj Seth. ORDER Per Rajendra A. M. Challenging the order dated 12/12/2014 of the CIT(A)-9Mumbai, the Assessing Officer (AO) and the assessee have filed cross-appeals for the year under consideration. Assessee-company, engaged in the business of securities trading and broking, filed its return of income on 30/09/ 2009, declaring total income of ₹ 37. 38 crores. The AO completed the assessment u/s. 143(3) of the Act, on 04/09/2013 .....

. In its reply dated 25/02/2013, the assessee contended that it followed mercantile system of accounting and had anticipated losses at the year end with respect to equity index/stock future in accordance with the provisions of the Act and the Accounting Standards, that loss suffered by the assessee could not be termed as notional/contingent loss. Referring to the case of Woodward Governor India (P) Ltd. , the AO held that mark to market transactions had to be given peculiar treatment, that as pe .....

s was nothing but a provision of contingent loss, that same could not be allowed as deduction in computing the income for the year under appeal, that future contracts for purchase of derivates were not accounted for as purchases in the books of accounts, that same were not part of stock in trade, that the real income theory would also not be applicable, that the expenditure was not in the nature of an ascertain/liability/expenditure. Accordingly, the provision on account of MTM loses of ₹ .....

under the head MTM losses. 4. During the course of hearing before us, the Departmental Representative (DR) supported the order of the AO. The Authorised Representative (AR) relied upon the cases of Centrum Broking Ltd. (70 SOT 389) & Kotak Mahindra Investment Ltd. (59 SOT 4). 5. We find that the issue stands decided in favour of the assessee by the Tribunal in the matters relied upon by the AR. It is found that in the of the Kotak Mahindra Investment Ltd. (supra), the Tribunal has held that .....

of the Act, that in the computation of income it had not made any dis - allowance on account of expenses incurred towards earning such exempt income. He directed the assessee to explain as to why the provisions of section 14A read with Rule 8D of the Income Tax Rules, 1962(Rules)should not be applied. Vide its letter 14/02/2013 the assessee stated that it had earned dividend income from the shares that were held stock in trade, that it was engaged predominantly buying & selling of shares and .....

he previous year, made an addition of ₹ 6. 43 lakhs(. 5% of the average of the investment). 7. During the appellate proceedings, the assessee made submissions before the FAA and relied upon the cases of Hero Cycles Ltd. (322 ITR 513), Yetish Trading Company Pvt. Ltd. (129 ITD 237)and Ganjam Trading company Ltd (ITA 3724/MUM/2005). After considering the submissions of the assessee and the assessment order, the FAA held that disallowance made by the AO was in order for the reasons mentioned .....

t the exempt income. In the case before us, the AO/FAA has not proved that stocks were held by the assessee as investment or that it had claimed by any expenditure for earning the tax free income. Therefore, reversing the order of the FAA, we decide the first ground of appeal in favour of the assessee. 9. Second Ground is about disallowing deprecation of ₹ 10. 63 lakhs. During the assessment proceedings, the AO found that assessee had claimed depreciation on certain assets which were purch .....

not be disallowed. Vide its letter dated 07/03/2013, the assessee stated that it had acquired certain assets through its group concern, that a copy of the fixed asset invoice was already filed, that the foreign group - company has made the initial payment on behalf of the assessee, that subsequently a debit note on the assessee was raised, that assets were owned by the assessee and were used during the year under consideration. The AO held that assessee was not the owner of the assets, that it h .....